Affordable Housing’s Costs: Checking Up

Over the next couple of weeks, I’m going to be checking in on a few of the stories I’ve covered over the last year or so.

The idea is to keep an eye on these issues. I want to check on the promises that were made by public officials and agencies, and I want to keep the pressure on, making sure that the promised reforms or actions actually end up happening.

First up, let’s take a look at California’s affordable housing industry.

Where We Left It

Last year, I produced a two-part series on affordable housing development in San Diego. I examined the cost of affordable developments, noting the disparity between what affordable apartments cost to build, on a per-unit basis, compared to similar quality market-rate housing.

After my first story came out, a state panel promised to investigate the spiraling cost of affordable housing development in California.

The California Tax Credit Allocation Committee, which hands out tens of millions of dollars of taxpayer grants each year to private developers to build affordable housing projects, made the step at a special meeting last September. The committee promised an extensive analysis that would compare affordable housing projects to private developments.

The idea was to understand exactly why these projects often cost so much more than market-rate apartments to build. I had examined this question in my story, pointing out that factors such as a building on certain hard-to-develop sites and a requirement to pay workers prevailing wages have pushed development costs up.

And, as my story also detailed, the California Tax Credit Allocation Committee has itself come under fire for driving up costs.

The system by which the committee hands out its taxpayer-funded grants rewards projects with added bells and whistles above projects that contain their per-unit costs. Some affordable housing developers described the process of applying for tax credits as a “beauty pageant,” that incentivizes costly features.

To some extent, the committee has acknowledged that its system has flaws, and the cost study was proposed as a means of addressing some of the concerns that have grown up around the tax credit allocation process

What’s Happened Since

Seven months since the California Tax Credit Allocation Committee pledged to do the investigation, it is yet to choose a company to complete the actual study.

The committee is close to selecting a company, a spokesman said, and an announcement should be made in the next couple of weeks.

So, what’s taking so long?

There are a couple of factors that have led to the delay:

• First, the study is no longer being commissioned solely by the committee. There are now three other Sacramento agencies involved in the process: The Department of Housing and Community Development, the Debt Limit Allocation Committee and the Housing Finance Agency.

Colin Parent, director of external affairs for the Department of Housing and Community Development, said there are good reasons why these agencies want to be involved. They’re all invested in affordable housing development in one form or another, he said, and therefore they’re all interested in making sure the study takes into account all the factors they see as important to understanding the issue.

“This isn’t just the examination of one government program, it’s an examination of a whole industry built around legions of government programs,” Parent said. “We’re working with a very significant, thoughtful approach.”

• The agencies commissioning the study also sought input from industry players as they designed the scope of work for the study.

Susan Tinsky, executive director of the San Diego Housing Federation, a coalition of affordable housing advocates and developers, said her organization has given input, and praised the efforts of the agencies to involve interested parties.

“It’s been a very inclusive process,” she said.

Defining the scope of the study, and outlining the exact questions that need to be answered, has therefore been an incredibly involved and complicated process, Parent said. The agencies issued a detailed request for proposals from companies to do the study earlier this year, he said, and a decision should be made shortly.

What’s Next

Once a company has been chosen, Parent said the study should take about seven months to complete.

It will be a mammoth task. The company will evaluate some 400 different projects, Parent said, taking into account all the various factors that push up the cost of affordable housing.

And the study will also weigh the relative merits of policies such as providing amenities like computer rooms and job training against the benefit of using that money to instead build more affordable apartments.

I’ll be checking in again with this process in a few months to see how that study is going, and when we’re likely to see some results.

Will Carless is an investigative reporter at Voice of San Diego currently focused on local education. You can reach him at will.carless@voiceofsandiego.org or 619.550.5670.

Written by Will Carless

Will Carless is the former head of investigations at Voice of San Diego. He currently lives in Montevideo, Uruguay, where he is a freelance foreign correspondent and occasional contributor to VOSD. You can reach him at will.carless.work@gmail.com.

Rleif is on the right track about comparing alternatives, like Section 8 rent subsidies. Instead of building one small apartment with $400,000, this same amount could provide a monthly subsidy of $800 for 40 years!

Rleif is on the right track about comparing alternatives, like Section 8 rent subsidies. Instead of building one small apartment with $400,000, this same amount could provide a monthly subsidy of $800 for 40 years!

Folks: this is tax-payer money we're talking about. This isn't rocket science. It's supposed to be affordable housing, not a monument to modern design. We've wasted, and are wasting, a lot of time and our money. Cut to the chase: Dollars per square foot of custom construction cost vs. acquisition cost of existing multi-family property tells story. Let's move on and get something done.

Folks: this is tax-payer money we're talking about. This isn't rocket science. It's supposed to be affordable housing, not a monument to modern design. We've wasted, and are wasting, a lot of time and our money. Cut to the chase: Dollars per square foot of custom construction cost vs. acquisition cost of existing multi-family property tells story. Let's move on and get something done.

An assessment of the cost of affordable housing should include all of the costs to the taxpayers. Besides the obvious costs of construction and land acquisition, the following should be included. 1) Costs for permits and taxes whether paid or forgiven by the City and/or County. 2) Tax credits and loss of taxes resulting because of the tax exempt status of interest. 3) Building management costs over the period that the building is required to be affordable. The true costs of these affordable apartments should be compared with the costs to the Government of equivalent Section 8 rent subsidies. This type of economic analysis will demonstrate if affordable housing is cost-effective and who really benefits from affordable housing

An assessment of the cost of affordable housing should include all of the costs to the taxpayers. Besides the obvious costs of construction and land acquisition, the following should be included. 1) Costs for permits and taxes whether paid or forgiven by the City and/or County. 2) Tax credits and loss of taxes resulting because of the tax exempt status of interest. 3) Building management costs over the period that the building is required to be affordable. The true costs of these affordable apartments should be compared with the costs to the Government of equivalent Section 8 rent subsidies. This type of economic analysis will demonstrate if affordable housing is cost-effective and who really benefits from affordable housing